Trade, inequality, and the political economy of institutions
By: prepared by Quy-Toan Do and Andrei A. Levchenko.
Contributors: Levchenko, Andrei A.; International Monetary Fund. Research Dept.
Series: IMF working paper -- WP/06/56
Publisher: International Monetary Fund, Research Dept.
Published: 2006
Place of publication: [Washington, D.C.]
Language: eng
Number of pages: 52
Subjects: International trade.; Income distribution.; Equality.
Description: We analyze the relationship between international trade and the quality of economic institutions, such as contract enforcement, rule of law, and property rights. In our model, firms differ in their preferences for institutional quality, which is determined endogenously in a political economy framework. We show that trade opening can worsen institutions when it increases the political power of a small elite of large exporters who prefer to maintain bad institutions. The detrimental effect of trade on institutions is most likely to occur when a small country captures a sufficiently large share of world exports in sectors characterized by economic profits.
Notes: "February 2006."

Includes bibliographical references (p. 50-52).

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